All eyes are now on Mexico’s proposed power reforms that threaten the interests of some of the world’s largest energy companies, many of them in the United States

Mexican President Andres Manuel López Obrador (AMLO) said on Wednesday that he would send a letter to the 25 federal lawmakers who recently formed a pro-Russian group in Mexico’s Congress if the United States revokes the visas. The United States issued a diplomatic note in protest.Several Democratic politicians, including U.S. Senate Foreign Relations Committee Chairman Robert Mermendes, sent a letter to U.S. Secretary of State Anthony Blinken on Tuesday. call Biden administration blocks Mexican lawmakers from entering, traveling or investing in U.S.

“I don’t think it’s fair, I don’t think it’s justified to suspend the visas of those who meet to speak out about Russia’s invasion of Ukraine,” Lopez Obrador told a morning news conference at the Palace of Nations.

burn goodwill

Democrats are now calling on the Biden administration to sanction a handful of lawmakers in their neighbors for daring to create a pro-Russian group, a sign of how clumsy and harsh U.S. foreign policy has become. The U.S. attempt to coerce nations into supporting an economic war against Russia not only shows complete disregard for so-called allied sovereignty, but (as North Carolina reader Plutonium Kun recently put it) burns a lot of goodwill and, in the process, even a potential sympathy The same is true in the country.

Mexico is the second largest trading partner of the United States, after Canada. Trade between the two countries has never been stronger. In 2021, the bilateral trade volume between Mexico and the United States will reach $661 billion, a record high. This is second only to Canada, which has $664 billion in bilateral trade with the United States.

But diplomatic relations between the two countries are at their lowest point in decades. As I reported in the article, “U.S.-Mexico relations hit new lows over Russia-Ukraine conflict,” Washington’s already tense relations with Mexico deteriorated further after AMLO refused to support sanctions against Russia in late March. Like most governments in Latin America, Mexico condemned Russia’s invasion of Ukraine but refused to join the sanctioning of the country. When U.S. Ambassador to Mexico Ken Salazar instructed Mexican lawmakers that Mexico could no way Has close diplomatic relations with Russia.

Another major point of contention between the two countries is the energy reform bill proposed by the AMLO government, which will be voted on in the coming days. As it stands, the bill has the potential to significantly weaken the privatization and liberalization of Mexico’s energy market, allowing state-owned Petroleos de Mexico and the Federal Electricity Commission (CFE) to play a greater role in the market.

If passed, the reforms would amend Articles 25, 27 and 28 of the Constitution to consolidate the role of the public Federal Energy Commission (CFE). As such, the CFE will become an autonomous legal entity, no longer bound by the subsidiaries and committees created in recent decades. CFE will also control At least It accounts for 54% of the national energy supply. The proposed reforms also stipulate that lithium and other minerals deemed strategic to the nation’s energy transition should be controlled by the state, with the state having sole exploration and mining rights.

wrong message type

While the reform appears to have the support of a majority of Mexican citizens, it has faced strong opposition from powerful business interests at home and abroad, including some of the world’s largest energy companies, many in the United States and Spain. Large domestic companies that benefit from heavily subsidized renewable electricity and foreign multinationals with operations in Mexico will also be affected.they include processing plant (assembly plants), bottlers such as Coca-Cola FEMSA, and large retail companies such as Oxxo, the convenience store chain owned by FEMSA. Households or small businesses without subsidies pay an average of 5.2 pesos per kilowatt-hour, while OXXO pays 1.8 pesos and Walmart 1.7 pesos, according to government data.

This means that large companies have a huge cost advantage over their small business competitors. For now, power reforms will remove that, much to the horror of affected companies as well as the U.S. government. It’s not just the threat the reforms pose to Mexican business interests; it could also send a message to other governments in Latin America that reversing privatization is now a distinct possibility. As I reported in February, resource nationalism is on the rise in Latin America even in countries traditionally aligned with the Washington Consensus.

This is the kind of message Washington is keen to dispel.To this end, the Biden administration on April 1 send Its climate envoy, John Kerry, whispered in AMLO’s ear. Also present at the meeting were Ken Salazar, the U.S. ambassador to Mexico with close ties to Texas Oil, and 20 U.S. company executives interested in investing in Mexico’s energy sector.

After the meeting, Kerry told reporters gathered outside the National Palace in Mexico that he proposed a series of measures to reach a consensus on the proposed electricity rate. The most controversial of these is the creation of a team led by Ambassador Salazar that will work with the White House and his office to help the AMLO administration align its reform efforts.

“President Lopez Obrador agreed that we need to work on this,” Kerry said, adding that the approach was in line with U.S. President Joe Biden’s vision. The next day, AMLO denied that he agreed to the arrangement:

“Well, we certainly can’t accept it, whether it’s from the U.S., Canada, China, or Russia. Yes, there was a proposal to communicate on the topic and have a group involved. But they brought it up; I kept silent. Not accepted.”

ratchet tension

Shortly after AMLO’s statement, U.S. Trade Representative Katherine Tai sent a letter to Mexico’s Economy Minister Tatiana Clouthier, warning that the AMLO government had still not addressed U.S. concerns about electricity bills.According to newspaper reports reformConfidential in private letters, Tai said the power industry law poses a significant risk to U.S. energy projects in Mexico.she also said U.S. companies face arbitrary treatment, more than $10 billion of U.S. investment in Mexico is at risk, and the Mexican government is urged to suspend laws and policies that the U.S. has raised concerns about.

Tai told Clouthier that all options would be considered under the U.S.-Mexico-Canada (USMCA) trade agreement if the Mexican government continues to pursue policies the U.S. believes violates the Trilateral Free Trade Agreement. Those options could include suing the Mexican government for any future losses due to any changes to energy regulation. This is made possible by the Investor-State Dispute Settlement (ISDS) provisions in USMCA, which allow foreign companies to sue host governments for losses due to policy or regulatory changes that reduce the expected profitability of their investments.

While Canada is not a party to the USMCA’s chapter on ISDS (Chapter 14), which means that Canadian investors cannot assert ISDS claims or against Canada, the ISDS provisions between the United States and Mexico remain in effect, albeit in form with NAFTA The chapters vary from 11 (as in this file by global law firm DLA Piper). ISDS provisions have been and can be invoked even if the rules are non-discriminatory or the profits come from causing public harm. Therefore, ISDS will strengthen perverse incentives for foreign investors at the expense of local businesses and public interests.

Thai’s letter concludes by urging the Mexican government to “stop these relevant actions and ensure that us Investors and exporters are protected. “

market manipulation

At present, there is no indication that the Mexican government is willing to do so.Amro himself assertion Governments that used to be subject to foreign capital manipulate electricity markets to support private companies. Therefore, he believes that any ISDS claim will ultimately end up in Mexico’s favor. He also accused the U.S. government of working with Mexican opposition parties to lobby against the proposed reforms:

“They showed us that they disagreed and even suggested it was a breach of the agreement, but it wasn’t. Political opposition meets with U.S. government officials. We respect everyone, but we act independently and sovereignly. “

Shortly after the press conference, Ambassador Salazar arrived A private meeting with the president at the Forbidden City, one of many held in recent months.Kurt Hackbart hint in the most recent Jacobin For Salazar, a longtime energy lobbyist, the ambassadorship represents a once-in-a-lifetime opportunity “to perfect a technique he’s been perfecting throughout his career: lip service to renewables while filling the coffers of the fossil fuel sector. energy.” :

Under his leadership, [U.S.] Ministry of the Interior Blocked Federal Regulators regulate greenhouse gas emissions through the Endangered Species Act, Green light for oil drilling In the Arctic for Royal Dutch Shell, Approved Gas Drilling In Utah’s Uintah Basin, most notoriously, BP’s drilling operations in the Gulf of Mexico were exempted from Environmental Impact Analysis The Deepwater Horizon disaster is less than a year away.

The Home Office not only continues to provide A further twenty-seven exemptions After the explosion; after a temporary suspension, it continues to rent Millions of acres of new land Drilling for oil and gas in the Gulf of Mexico while hiring a former BP executive Operates its mine management services.

After leaving the Home Office in 2013, Salazar worked through a revolving door for WilmerHale, a legal and lobbying firm Close ties to the Trump family, whose roster of drilling and mining-related clients includes – you guessed it – BP.Salazar secures lucrative new job in private sector, uses his influence to support Ladder pipeline and Trans-Pacific Agreement (TPP), its “investor countryClause would allow companies to challenge environmental regulations in private court; objections would limit Hydraulic fracturing and remote oil well from buildings and bodies of water; against climate litigation opposed the fossil fuel sector; and, in a heightened question of ethical rules, provided legal counsel to the same company, Anadarko Petroleum, benefit multiple times from his tenure in government.

Now, Salazar continues his mission to defend America’s energy interests, this time south of the border. But the AMLO government still refuses to budge. It is determined to push for energy reform, even if it means angering its biggest trading partner.For AMLO, energy independence is what he calls The fourth transformation.

On Thursday (April 7), Mexico’s Supreme Court finally approved the proposed electricity bill. The question now is whether AMLO’s government can secure a two-thirds majority in Congress to support the bill. If so, the next question is: how will Washington retaliate?